Question

James used $250,000 from his savings account that paid an annual interest of 15% to purchase a hardware store. After one year, James sold the business for $320,000. What is his accounting profit?

Answer 1

There will be accounting profit of $32500

Step-by-step explanation:

We have given that amount used from saving account = $250000

Interest on the this amount = 15% for one year

So interest in one year
`=(250000* 15* 1)/(100)=37500`

So total amount used for purchasing hardware = $250000+$37500 = $287500

It is given that he sold the for $320000

We have to find the accounting profit

So profit will be equal to $320000 - $287500 = $32500

So there will be accounting profit will be $32500